Tag: Federal Reserve

In a blog post this summer, we assessed the history of U.S. public banks over three centuries. We concluded that, “The best way to ensure that financial intermediation advances social welfare is to define a carefully-constrained charter, mandate transparent limits on self-dealing up front, and ensure that the bank is fit for purpose under reasonable rules that ensure long-term profit in concert with effective public service. Public subsidies to support public service make sense, but only when sufficient regulation and private-sector discipline constrain the natural self-serving instincts of all-too-many politicians.” Maybe so, but sizeable minorities of voters this November said that they so distrust private banks that they want a public alternative no matter the controls that might apply. In a blue-wave mood, federal legislators are listening. Continue reading “Public Banking Under a Blue Wave”→

Starting in 2010, U.S. regulators erected a pyramid of complex, costly, and stringent safety-and-soundness, resolution-planning, and conduct regulations for the largest U.S. banking organizations that have come to be called SIFIs (i.e., systemically-important financial institutions). Starting in 2018, the agencies began to demolish the still-incomplete SIFI pyramid, issuing on October 31 two sweeping proposals (here and here) not only to implement new U.S. law, but also to go farther. Bankers say this is nice, but not enough; critics lambast the proposals as forerunners of the next financial crisis. Either could be right – the proposals repeat the most fundamental mistake of post-crisis financial regulation: rules piled upon rules or, now, rules subtracted from rules without even an effort to anticipate how all of the revised rules work taken altogether in the financial marketplace as it exists in the real world, not in a set of academic papers or political edicts. Continue reading “SIFIs and Sisyphus: The Latest Bank-Regulation Rewrite”→

Recent jobs data sparked excitement asnews reportstalked of how America is finally going back to work. This is understandable optimism, based as it was on a concurrent rise in labor-force participation and a drop in the government’s preferred measure ofunemployment. Here, we assess whether the Fed’s “solid” and “very well performing” economy has finally allowed low-and-moderate income (LMI) households to share the prosperity rapidly pooling at the very top of the income and wealth distribution. In short, and sad to say, it isn’t – hourly pay for low-wage/low-skill workers has declined in real (i.e., inflation-adjusted) terms over the past four decades and is essentially flat since 2010. As we noted in ourlast blog post, wealth concentration has soared since the financial crisis. Even if a corner has now been turned for everyone else, it’s just a very tight one at the bottom of the equality canyon.Continue reading “Hard Work, Low Pay, High Costs: Life on the Ground in a “Well-Performing” Economy”→

In our lastblog post, we laid out the most telling inequality-data points from an important new study from the Federal Reserve Bank of Minneapolis which for the first time runs from 1949 to 2016 and adds many critical equality measures. These data show more decisively than ever not only that wealth inequality in 2016 is the worst since at least the Second World War, but also that this is due to who holds the assets that have gained the most. Since which assets return how much is due now in large part to post-crisis monetary and regulatory policy rather than to market forces and broader macroeconomic trends, it’s post-crisis policy – not forces from beyond – that increasingly dictates U.S. economic equality.Continue reading “How the Other Half Goes Broke”→

Janet Yellen,Ben Bernanke, andJerome Powellhave each bemoaned U.S. economic inequality and then asserted that it’s everyone else’s fault. On the blog and in ourspeeches,we counter that post-crisis monetary and regulatory policy had an unintended but nonetheless dramatic and destructive impact on the income and wealth divides. In doing so, we often point to just how much worse and how much faster inequality became as post-crisis policy took hold. Demographics, technology, and trade policy didn’t change anywhere near that much that fast. Now,anew studyfrom the Federal Reserve Bank of Minneapolis takes the story forward with a trove of data evaluating U.S. economic inequality from 1949 through 2016. For all the recovery and employment the Fed cites in its equality defense, these data tell a far different tale. Continue reading “It’s Worse Than You Thought”→